<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NO. 1-2921
PANHANDLE EASTERN PIPE LINE COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 44-0382470
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
5400 WESTHEIMER COURT
P.O. BOX 1642
HOUSTON, TEXAS 77251-1642
(Address, including zip code, of principal executive offices)
(713) 627-5400
(Telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
7.95% Debentures Due 2023 The New York Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The Registrant meets the conditions set forth in General Instructions
(J)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the
reduced disclosure format. Items 4, 10, 11, 12 and 13 have been omitted and Item
7 has been reduced in accordance with such Instruction J.
The Registrant's parent, PanEnergy Corp (File No. 1-8157), files reports
and proxy materials pursuant to the Securities Exchange Act of 1934.
---------------------
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant.
NONE
Indicate number of shares outstanding of each of the Registrant's classes
of Common Stock, as of the latest practicable date.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING
TITLE OF EACH CLASS AS OF FEBRUARY 28, 1997
------------------- ----------------------------
<S> <C>
Common Stock, without par value 1,000
</TABLE>
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
Item 1. Business.................................................... 1
General..................................................... 1
Natural Gas Transmission.................................... 2
Regulation.................................................. 3
Rates and Regulatory Proceedings............................ 4
Competition................................................. 4
Environmental Matters....................................... 4
General Matters............................................. 5
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 5
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 7
Item 6. Selected Financial Data..................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 7
Item 8. Financial Statements and Supplementary Data................. 9
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 9
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 10
Index to Financial Statements and Schedules........................... 11
</TABLE>
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All gas volumes used herein are stated at 14.73 pounds per square inch, on
a dry basis, at 60 degrees Fahrenheit.
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Panhandle Eastern Pipe Line Company ("PEPL"), a subsidiary of PanEnergy
Corp ("PEC"), is a Delaware corporation incorporated in 1929. PEPL and its
subsidiaries (the "Company") are primarily engaged in the interstate
transportation and storage of natural gas.
On November 25, 1996, PEC, Duke Power Company ("Duke Power") and Duke
Transaction Corporation announced a definitive merger agreement for a tax-free,
stock-for-stock transaction. Under the agreement, each share of PEC common stock
would be converted into 1.0444 common shares of Duke Power. The merger is
conditioned upon, among other things, the approval of PEC and Duke Power
shareholders, and approvals of appropriate state and federal regulatory
agencies. The Company anticipates that the stockholder and regulatory approvals
can be completed within 12 months. At closing, Duke Power will change its name
to Duke Energy Corporation ("Duke Energy") and PEC will become a wholly-owned
subsidiary of Duke Energy. The merger will be accounted for under the pooling of
interests method.
Information concerning components of the Company's consolidated operating
revenues, including revenues attributable to transportation, storage and sales
of natural gas, for the years 1996, 1995 and 1994 is contained in the
Consolidated Statement of Income on page F-2, which is incorporated herein by
reference.
Executive offices of PEPL are located at 5400 Westheimer Court, Houston,
Texas 77056-5310, and the telephone number is (713) 627-5400.
Certain Terms
Certain terms used in the description of the Company's business are
explained below.
Federal Energy Regulatory Commission ("FERC"): The agency that regulates
the transportation of natural gas in interstate commerce under the Natural Gas
Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA").
FERC's jurisdiction includes rate-making, construction of facilities and
authorization to provide service.
Firm Service: Transportation or storage of third-party gas, for which
customers pay a charge to reserve pipeline or storage capacity.
Interruptible Service: Transportation or storage of third-party gas
provided by pipelines on a capacity-available, non-firm basis.
Local Distribution Company ("LDC"): A municipal or investor-owned utility
that sells or transports gas to local commercial, industrial and residential
consumers.
Order 636: The FERC pipeline service restructuring rule that guided the
industry's transition to unbundled, open-access pipeline contract transportation
and related services, creating a more market-responsive environment.
Transition Costs: Those costs incurred as a result of the pipelines'
transition to unbundled services under Order 636. The disposition of natural gas
contracts tied to the former merchant function comprises the majority of such
costs.
Units of Measure:
<TABLE>
<S> <C>
Billion British thermal units per
BBtu/d: day
TBtu: Trillion British thermal units
MMcf/d: Million cubic feet per day
Bcf: Billion cubic feet
Tcf: Trillion cubic feet
</TABLE>
1
<PAGE> 4
NATURAL GAS TRANSMISSION
General
PEPL and its principal subsidiary, Trunkline Gas Company ("Trunkline"),
together with Texas Eastern Transmission Corporation ("TETCO") and Algonquin Gas
Transmission Company ("Algonquin"), both subsidiaries of PEC, own and operate
one of the nation's largest gas transmission networks. This fully interconnected
22,000-mile system can receive natural gas from most major North American
producing regions for delivery to markets in the Mid-Atlantic, New England and
Midwest states. During 1996, PEC's pipelines delivered 2,939 TBtu of natural
gas, equal to approximately 12% of U.S. consumption.
Market and Supply Area Deliveries
As used herein, "market area" with respect to each pipeline refers to those
portions of the pipeline that include primarily delivery points for natural gas
leaving the pipeline, and "supply area" with respect to each pipeline refers to
those portions of the pipeline that include primarily receipt points for gas
entering the pipeline. Market-area deliveries represent volumes of gas delivered
to the market area, while supply-area deliveries represent volumes of gas
delivered to the supply area. Generally, rates for supply-area service have
lower margins than rates for market-area service.
A substantial majority of the delivered volumes of the Company's interstate
pipelines represents gas transported under long-term firm service agreements
with LDC customers in the pipelines' market areas. Firm transportation services
are also provided under contract to gas marketers, producers, other pipelines
and a variety of end-users. In addition, the pipelines offer interruptible
transportation to customers on a short-term or seasonal basis. See "Regulation"
and "Competition."
Set forth below is information concerning throughput volumes for PEPL and
Trunkline for 1996, 1995 and 1994 (volumes in TBtu).
<TABLE>
<CAPTION>
1996 % TOTAL 1995 % TOTAL 1994 % TOTAL
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Market Area
PEPL........................................ 654 50 619 52 582 49
Trunkline................................... 529 40 403 34 449 38
----- --- ----- --- ----- ---
Total............................... 1,183 90 1,022 86 1,031 87
----- --- ----- --- ----- ---
Supply Area
PEPL........................................ 33 2 44 4 44 4
Trunkline................................... 103 8 116 10 111 9
----- --- ----- --- ----- ---
Total............................... 136 10 160 14 155 13
----- --- ----- --- ----- ---
Total Volumes....................... 1,319 100 1,182 100 1,186 100
===== === ===== === ===== ===
Summary by Pipeline (Total Volumes)
PEPL (1).................................... 687 52 663 56 626 53
Trunkline (2)............................... 632 48 519 44 560 47
----- --- ----- --- ----- ---
Total............................... 1,319 100 1,182 100 1,186 100
===== === ===== === ===== ===
</TABLE>
- ---------------
(1) PEPL volumes include 28 TBtu, 22 TBtu and 45 TBtu in deliveries to TETCO
during 1996, 1995 and 1994, respectively.
(2) Trunkline volumes include 28 TBtu, 21 TBtu and 43 TBtu in deliveries to
TETCO during 1996, 1995 and 1994, respectively.
Demand for gas transmission on the Company's interstate pipeline system is
seasonal, with the highest throughput occurring during the colder periods in the
first and fourth quarters -- the winter heating season.
2
<PAGE> 5
PEPL's market volumes are concentrated among approximately 20 utilities
located in the Midwest market area that encompasses large portions of Michigan,
Ohio, Indiana, Illinois and Missouri. PEPL's total deliveries increased 4% in
1996.
Trunkline's major customers include eight utilities located in portions of
Tennessee, Missouri, Illinois, Indiana and Michigan. Trunkline's total
throughput increased 22% in 1996.
PEPL and TETCO signed contracts to provide 50 BBtu/d of firm service to a
new market, the greater Cincinnati area, starting in November 1996. The
contracts with the Cincinnati Gas & Electric Co call for firm transportation
service by TETCO and firm transportation and storage service by PEPL. Also,
Trunkline will provide interruptible transportation service.
In April 1996, PEPL and Trunkline began providing 85 BBtu/d of additional
firm transportation service to CoEnergy Trading Company for its Michigan
customers under five-year contracts.
Trunkline filed with FERC in late 1996 for an expansion of its Terrebonne
system with a planned 1998 in-service date, targeting expanding natural gas
production in the Gulf of Mexico.
Storage
PEPL owns and operates three underground storage fields located in
Illinois, Michigan and Oklahoma. Trunkline owns and operates one storage field
in Louisiana. The combined maximum working gas capacity is 44 Bcf. Additionally,
PEPL, through its Pan Gas Storage Company ("Pan Gas") subsidiary, is the owner
of a storage field in Kansas with an estimated maximum capacity of 26 Bcf. PEPL
is the operator of the field. Since the implementation of the Order 636
restructuring, PEPL, Trunkline and Pan Gas all offer firm and interruptible
storage on an open-access basis. In addition to owning storage fields, PEPL also
leases storage capacity. PEPL and Trunkline have retained the right to use up to
15 Bcf and 10 Bcf, respectively, of their storage capacity for system needs. In
January 1997, PEPL filed with FERC to transfer its storage facilities to Pan
Gas.
Northern Border Partners, L.P.
A PEPL subsidiary owns an approximate 8% interest (a 33% voting interest)
in Northern Border Partners, L.P. ("Northern Border MLP"), consisting of general
partner and subordinated limited partner interests. Northern Border MLP owns a
70% interest in Northern Border Pipeline Company ("Northern Border Pipeline"),
which owns and operates a transmission system consisting of 969 miles of
pipeline extending from the Canadian border through Montana to Iowa. Northern
Border Pipeline transports natural gas both under traditional long-term
contracts and on an open-access basis. It has a certificated transport capacity
of 975 MMcf/d.
REGULATION
PEPL, Trunkline and Pan Gas are "natural gas companies" under the NGA and
NGPA and, as such, are subject to the jurisdiction of FERC.
The NGA grants to FERC authority over the construction and operation of
pipeline and related facilities utilized in the transportation and sale of
natural gas in interstate commerce, including the extension, enlargement or
abandonment of such facilities. PEPL and its subsidiaries hold required
certificates of public convenience and necessity issued by FERC, authorizing
them to construct and operate the pipelines, facilities and properties now in
operation for which certificates are required, and to transport and store
natural gas in interstate commerce.
FERC also has authority to regulate rates and charges for natural gas
transported in or stored for interstate commerce or sold by a natural gas
company in interstate commerce for resale. PEPL and its subsidiaries file with
FERC applications for changes in transportation and storage rates and charges.
These changes are normally allowed to become effective after a suspension
period, subject to refund, until such time as FERC authorizes the actual level
of rates and charges.
3
<PAGE> 6
PEPL and Trunkline operate as open-access transporters of natural gas. In
1992, FERC issued Order 636, which requires open-access pipelines to provide
firm and interruptible transportation services on an equal basis for all gas
supplies, whether purchased from the pipeline or from another gas supplier. To
implement this requirement, Order 636 provides, among other things, for
mandatory unbundling of services that have historically been provided by
pipelines into separate open-access transportation, sales and storage services.
Order 636 provided for the use of the straight fixed-variable rate design,
which assigns return on equity, related taxes and other fixed costs to the
reservation component of rates. In addition, Order 636 allows pipelines to
recover eligible costs resulting from implementation of Order 636 ("transition
costs"). On July 16, 1996, the U.S. Court of Appeals for the District of
Columbia upheld, in general, all aspects of Order 636 and remanded certain
issues, including recovery of gas supply realignment costs, for further
explanation. This decision is on appeal to the U.S. Supreme Court. On February
27, 1997, FERC issued an order reaffirming the right of interstate pipelines to
recover 100% of gas supply realignment costs. In addition, this matter is
substantially mitigated by PEPL's transition cost settlements.
Regulation of the importation and exportation of natural gas is vested in
the Secretary of Energy, who has delegated various aspects of this jurisdiction
to FERC and the Office of Fossil Fuels of the Department of Energy.
PEPL and its subsidiaries are subject to the Natural Gas Pipeline Safety
Act of 1968, which regulates gas pipeline safety requirements and to federal and
state environmental legislation.
RATES AND REGULATORY PROCEEDINGS
When rate cases are pending final FERC approval, a portion of the revenues
collected by the Company's natural gas pipelines is subject to possible refund.
A summary of the status of significant pending rate cases and related regulatory
matters involving PEPL and Trunkline is contained in Note 4 of the Notes to
Consolidated Financial Statements on pages 44 and 45 of the Annual Report, which
are incorporated herein by reference.
COMPETITION
PEPL and Trunkline compete with other interstate and intrastate pipeline
companies in the transportation and storage of natural gas. The principal
elements of competition among pipelines are rates, terms of service, and
flexibility and reliability of service. PEPL and Trunkline continue to offer
selective discounting to maximize revenues from existing capacity.
PEPL and Trunkline compete directly with ANR Pipeline Company, Natural Gas
Pipeline Company of America and Texas Gas Transmission Corporation in the
Midwest market area.
Natural gas competes with other forms of energy available to the Company's
customers and end users, including electricity, coal and fuel oils. The primary
competitive factor is price. Changes in the availability or price of natural gas
and other forms of energy, the level of business activity, conservation,
legislation and governmental regulations, the capability to convert to
alternative fuels, and other factors, including weather, affect the demand for
natural gas in the areas served by the Company.
ENVIRONMENTAL MATTERS
For a discussion of environmental matters involving the Company, see Notes
11 and 12 of the Notes to Consolidated Financial Statements, which are
incorporated herein by reference. Except as set forth therein, compliance with
Federal, State and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise
protecting the environment, are not expected to have a material effect upon the
capital expenditures, earnings or financial position of the Company.
4
<PAGE> 7
GENERAL MATTERS
During 1996, no single customer accounted for 10% or more of the Company's
consolidated revenues.
While the Company does engage in some research and development activities,
no such activities conducted during the past three years have been material to
the Company's business, nor have there been any material customer-sponsored
research activities during that period relating to the Company's business
activities.
PEPL and Trunkline are members of and provide support to the Gas Research
Institute ("GRI"), which plans and manages research and development efforts for
the gas industry. The funds used to support GRI are derived from a surcharge on
the pipelines' rates pursuant to FERC authorization. Payments amounted to
approximately $3.1 million, $5.1 million and $8.5 million in 1996, 1995 and
1994, respectively.
Foreign operations and export sales are not material to the Company's
business as a whole.
As of December 31, 1996, the Company had approximately 1,100 employees.
ITEM 2. PROPERTIES
PEPL's transmission system, which consists of four large-diameter parallel
pipelines and 13 mainline compressor stations, extends a distance of
approximately 1,300 miles from producing areas in the Anadarko Basin of Texas,
Oklahoma and Kansas through the states of Missouri, Illinois, Indiana and Ohio
into Michigan.
Trunkline's transmission system extends approximately 1,400 miles from the
Gulf Coast areas of Texas and Louisiana through the states of Arkansas,
Mississippi, Tennessee, Kentucky, Illinois and Indiana to a point on the
Indiana-Michigan border near Elkhart, Indiana. The system consists principally
of three large-diameter parallel pipelines and 18 mainline compressor stations.
Trunkline also owns and operates two offshore Louisiana gas supply systems
consisting of 337 miles of pipeline extending approximately 81 miles into the
Gulf of Mexico.
For information concerning natural gas storage properties, see "Natural Gas
Transmission -- Storage" under Item 1, which is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
For information concerning material legal proceedings, see Notes 3, 11 and
12 of the Notes to Consolidated Financial Statements, which are incorporated
herein by reference.
5
<PAGE> 8
[Map of PanEnergy Corp
Showing Pipelines, Storage Facilities,
Principal Supply Areas and Proposed Pipelines.]
6
<PAGE> 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of PEPL's outstanding common stock, without par value, is owned by
PanEnergy. In December 1996, July 1996 and December 1995, PEPL declared and paid
dividends on common stock of $100 million, $100 million and $400 million,
respectively, in the form of promissory notes due PanEnergy bearing interest at
prime rates.
ITEM 6. SELECTED FINANCIAL DATA
Selected consolidated financial and operating data is presented on Page
F-17, which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information is provided to facilitate increased understanding
of the 1996 and 1995 consolidated financial statements and accompanying notes of
the Company, and should be read in conjunction therewith and with the
information set forth under Item 1. Because all of the outstanding capital stock
of PEPL is owned by PanEnergy, the following discussion has been prepared in
accordance with the reduced disclosure format permitted by Form 10-K for issuers
that are wholly-owned subsidiaries of reporting companies under the Securities
Exchange Act of 1934.
OPERATING ENVIRONMENT
PEPL and Trunkline continue to advance projects that provide expanded
services to meet the specific needs of customers. In 1996, Trunkline filed with
FERC for a $50 million expansion of its Terrebonne system, with a planned 1998
in-service date, targeting expanding natural gas production in the Gulf of
Mexico. In addition, PEPL and Trunkline offer selective discounting to maximize
revenues from existing capacity.
RESULTS OF OPERATIONS
The Company reported consolidated net income of $87.7 million in 1996
compared with $100.7 million in 1995.
OPERATING INCOME AND EARNINGS BEFORE INTEREST AND TAX ANALYSIS
PANHANDLE EASTERN PIPE LINE COMPANY*
<TABLE>
<CAPTION>
MILLIONS 1996 1995
- -------- ------ ------
<S> <C> <C>
Transportation Revenue...................................... $278.2 $304.8
Storage Revenue............................................. 39.7 47.3
Other Revenue............................................... 20.6 19.6
------ ------
TOTAL REVENUES.............................................. 338.5 371.7
Operating Expenses.......................................... 167.8 193.1
Depreciation and Amortization............................... 30.1 34.7
------ ------
OPERATING INCOME............................................ 140.6 143.9
Equity in Earnings of Northern Border Partners, L.P......... 4.4 7.2
Other Income, Net of Deductions............................. 4.3 (1.9)
------ ------
EARNINGS BEFORE INTEREST AND TAX............................ $149.3 $149.2
====== ======
VOLUMES, TBtu
Market area................................................. 654 619
Supply area................................................. 33 44
------ ------
Total Deliveries............................................ 687 663
====== ======
</TABLE>
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* Includes PEPL and other natural gas transmission entities owned by PEPL,
exclusive of Trunkline.
7
<PAGE> 10
Operating income for 1996 was $140.6 million, compared to $143.9 million
for 1995. Earnings before interest and tax for PEPL remained steady at $149.3
million in 1996. Earnings in 1996 included $19.6 million of income for the
resolution of regulatory matters as compared to $25.5 million for similar
resolutions in 1995. Higher earnings in 1996 from increased rate realization and
colder weather combined with lower operating expenses more than offset $9.5
million of severance expense recorded in 1996. Revenue declines due to the
transfer of gathering assets to an affiliate in August 1995 were substantially
offset by related operating and depreciation expense reductions.
TRUNKLINE GAS COMPANY
<TABLE>
<CAPTION>
MILLIONS 1996 1995
- -------- ------ ------
<S> <C> <C>
Transportation Revenue...................................... $171.2 $151.2
Storage Revenue............................................. 2.1 2.4
Other Revenue............................................... 5.6 6.5
------ ------
TOTAL REVENUES.............................................. 178.9 160.1
Operating Expenses.......................................... 108.2 92.1
Depreciation and Amortization............................... 23.5 22.4
------ ------
OPERATING INCOME............................................ 47.2 45.6
Other Income, Net of Deductions............................. (0.4) 2.3
------ ------
EARNINGS BEFORE INTEREST AND TAX............................ $ 46.8 $ 47.9
====== ======
VOLUMES, TBtu
Market area................................................. 529 403
Supply area................................................. 103 116
------ ------
Total Deliveries............................................ 632 519
====== ======
</TABLE>
Operating income for Trunkline increased $1.6 million in 1996 as compared
with 1995. Higher transportation revenue from new contracts and colder weather
in 1996 offset increased expenses resulting from the recognition of $10.3
million of nonrecurring additional lease expense and $5 million of severance
expense in 1996. Earnings before interest and tax decreased $1.1 million in 1996
as compared with 1995.
ELIMINATIONS
Included in the amounts outlined above are several intercompany
transactions that do not impact consolidated earnings before interest and tax.
INTEREST EXPENSE
Consolidated interest expense increased $24.2 million, or 64%, in 1996
compared with 1995 primarily a result of higher average debt balances
outstanding due PanEnergy.
INCOME TAX
The effective tax rates for 1996 and 1995 differed from the statutory
federal income tax rates primarily because of the effect of state income taxes.
8
<PAGE> 11
CAPITAL EXPENDITURES
Capital expenditures totaled $51.6 million in 1996, compared with $64.6
million in 1995. The Company currently expects to invest approximately $90
million in 1997 capital expenditures, with the majority of expenditures related
to market expansion projects. Funding for 1997 capital expenditures is expected
to be provided by cash from operations, periodic sales of customer accounts with
limited recourse and/or the collection of intercompany amounts owed the Company.
In addition, PEPL has an effective shelf registration statement with the
Securities and Exchange Commission for the issuance of $100 million of unsecured
debt securities.
INTERCOMPANY FINANCING ACTIVITY
Net intercompany advances are carried as open accounts and are not
segregated between current and non-current amounts. Effective January 1, 1995,
intercompany advances do not bear interest. Increases and decreases in advances
result from the movement of funds to provide for operations, capital
expenditures and debt payments of PanEnergy and its subsidiaries. The collection
of advances receivable is subject to the availability of funds to PanEnergy,
whose major sources of internally-generated funds include dividends and advances
from subsidiaries. Advances and note receivable-parent aggregated $652.9 million
and $566.9 million at December 31, 1996 and 1995, respectively.
In December 1996, July 1996 and December 1995, PEPL declared and paid
dividends on common stock of $100 million, $100 million and $400 million,
respectively, in the form of promissory notes due PanEnergy bearing interest at
prime rates.
FORWARD-LOOKING INFORMATION
This report may contain certain forward-looking information regarding the
Company, including projections, estimates, forecasts, plans and objectives.
Although management believes that all such statements are based upon reasonable
assumptions, no assurance can be given that the actual results will not differ
materially from those contained in such forward-looking statements.
Important factors that could cause actual results to differ include, but
are not limited to, general economic conditions, natural gas and liquids prices,
competition from other pipelines and alternative fuels, weather conditions,
state and federal regulation, legal and regulatory proceedings, the development
of new markets, services and products, and the condition of the capital markets
utilized by the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to "Index -- Financial Statements" under Item 14(a)(1).
See the consolidated quarterly financial data on page F-16, which is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
9
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report or
incorporated herein by reference:
(1) The Consolidated Financial Statements of Panhandle Eastern Pipe
Line Company and Subsidiaries are listed on the Index, page 11.
(2) Exhibits filed herewith are designated by an asterisk (*); all
exhibits not so designated are incorporated herein by reference to a prior
filing as indicated.
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- --------
<S> <C> <C> <C>
3.01 Restated Certificate of 3.01 to Form 10-K of PEPL for the 1-2921
Incorporation of Panhandle Eastern year ended December 31, 1993
Pipe Line Company, dated October
25, 1993
3.02 By-Laws of Panhandle Eastern Pipe 19(a) to Form 10-Q of PEPL for 1-2921
Line Company, effective July 23, quarter ended September 30, 1986
1986
4.01 Indenture, dated as of February 1, 4 to Form S-3 of PEPL filed 33-58552
1993, between Panhandle Eastern February 19, 1993
Pipe Line Company and Morgan
Guaranty Trust Company of New York
4.02 Letter, dated February 24, 1994, 4.06 to Form 10-K of PEPL for the 1-2921
from Nations Bank of Texas, year ended December 31, 1993
National Association accepting its
appointment as successor Trustee
with respect to all securities
issued or to be issued under the
Indenture dated as of February 1,
1993, included as Exhibit 4.05
10.01 Contract for Firm Transportation 10.41 to Form 10-K of PEC for the 1-8157
of Natural Gas between Consumers year ended December 31, 1989
Power Company and Trunkline Gas
Company, dated November 1, 1989,
and Amendment, dated November 1,
1989
10.02 Contract for Firm Transportation 10.47 to Form 10-K of PEC for year 1-8157
of Natural Gas between Consumers ended December 31, 1991
Power Company and Trunkline Gas
Company, dated November 1, 1991
10.03 Contract for Firm Transportation 10.3 to Form 10-K of PEPL for the 1-2921
of Natural Gas between Consumers year ended December 31, 1993
Power Company and Trunkline Gas
Company, dated September 1, 1993
*23 Consent of KPMG Peat Marwick LLP
*24 Powers of Attorney
*27 Financial Data Schedule for
December 31, 1996
</TABLE>
The total amount of securities of the Registrant or its subsidiaries
authorized under any instrument with respect to long-term debt not filed as an
Exhibit does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant agrees, upon request of the
Securities and Exchange Commission, to furnish copies of any or all of such
instruments.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the fourth quarter of 1996.
10
<PAGE> 13
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
INDEX
FINANCIAL STATEMENTS AND SCHEDULES
---------------------
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated Statement of Income............................ F-2
Consolidated Balance Sheet.................................. F-3
Consolidated Statement of Common Stockholder's Equity....... F-5
Consolidated Statement of Cash Flows........................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
All Schedules are omitted because they are not applicable, not required or
the information is included in the Consolidated Financial Statements or the
Notes thereto.
11
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Panhandle Eastern Pipe Line Company:
We have audited the accompanying consolidated balance sheets of Panhandle
Eastern Pipe Line Company and Subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, common stockholder's equity and
cash flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Panhandle
Eastern Pipe Line Company and Subsidiaries at December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
January 16, 1997
F-1
<PAGE> 15
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
MILLIONS 1996 1995 1994
- -------- ------ ------ ------
<S> <C> <C> <C>
OPERATING REVENUES
Transportation and storage of natural gas................. $510.1 $516.8 $535.9
Sales of natural gas...................................... -- -- 177.9
Other..................................................... 23.5 23.2 26.1
------ ------ ------
Total (Notes 2, 3 and 5).......................... 533.6 540.0 739.9
------ ------ ------
COSTS AND EXPENSES
Natural gas purchased..................................... -- -- 177.9
Operating and maintenance................................. 177.2 190.9 198.4
General and administrative................................ 83.5 72.2 86.3
Depreciation and amortization (Note 8).................... 57.8 59.2 51.7
Miscellaneous taxes....................................... 27.0 27.8 27.9
------ ------ ------
Total (Note 2).................................... 345.5 350.1 542.2
------ ------ ------
Operating Income............................................ 188.1 189.9 197.7
------ ------ ------
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated affiliates (Note
7)..................................................... 5.7 7.5 5.3
Miscellaneous income...................................... 16.9 10.7 2.7
Miscellaneous deductions (Note 3)......................... (12.9) (10.7) (6.5)
------ ------ ------
Total............................................. 9.7 7.5 1.5
------ ------ ------
Earnings Before Interest and Tax............................ 197.8 197.4 199.2
------ ------ ------
Interest Income -- Parent................................... -- -- 42.6
------ ------ ------
INTEREST EXPENSE
Long-term debt............................................ 26.0 36.9 45.0
Parent.................................................... 34.8 (0.3) --
Other..................................................... 1.0 1.0 2.5
------ ------ ------
Total (Note 9).................................... 61.8 37.6 47.5
------ ------ ------
Earnings Before Income Tax.................................. 136.0 159.8 194.3
Income Tax (Note 4)......................................... 48.3 59.1 75.8
------ ------ ------
NET INCOME.................................................. $ 87.7 $100.7 $118.5
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE> 16
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
MILLIONS 1996 1995
- -------- --------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 0.1 $ 0.2
Accounts receivable
Customers (Note 5)..................................... 48.6 58.7
Affiliates (Note 2).................................... 5.0 6.1
Other.................................................. 4.5 3.4
Inventory and supplies (Note 6)........................... 44.3 55.3
Current deferred income tax (Note 4)...................... 8.6 13.0
Other (Notes 3 and 6)..................................... 57.4 46.1
--------- ---------
Total............................................. 168.5 182.8
--------- ---------
INVESTMENTS
Advances and note receivable -- parent (Note 2)........... 652.9 566.9
Other (Note 7)............................................ 51.7 48.3
--------- ---------
Total............................................. 704.6 615.2
--------- ---------
PLANT, PROPERTY AND EQUIPMENT
Original cost (Note 8).................................... 2,672.2 2,782.1
Accumulated depreciation and amortization................. (1,749.6) (1,818.8)
--------- ---------
Net plant, property and equipment................. 922.6 963.3
--------- ---------
DEFERRED CHARGES (Notes 1 and 3)............................ 104.2 155.1
--------- ---------
TOTAL ASSETS................................................ $ 1,899.9 $ 1,916.4
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 17
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
MILLIONS 1996 1995
- -------- -------- --------
<S> <C> <C>
CURRENT LIABILITIES
Long-term debt due within one year (Note 9)............... $ -- $ 4.5
Notes payable -- parent (Note 9).......................... 600.0 400.0
Rate refund provisions (Note 3)........................... 37.0 53.3
Accounts payable
Trade.................................................. 10.8 10.6
Affiliates (Note 2).................................... 19.6 20.4
Accrued income tax -- parent (Note 4)..................... 63.4 55.3
Other accrued taxes....................................... 23.0 18.8
Other (Note 6)............................................ 87.9 88.1
-------- --------
Total............................................. 841.7 651.0
-------- --------
DEFERRED LIABILITIES AND CREDITS
Deferred income tax (Note 4).............................. 83.5 176.5
Rate refund provisions (Note 3)........................... 81.5 66.4
Other..................................................... 98.3 115.3
-------- --------
Total............................................. 263.3 358.2
-------- --------
LONG-TERM DEBT (Note 9)..................................... 299.2 299.2
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 3, 5, 7, 10,
11, 12 and 13)
COMMON STOCKHOLDER'S EQUITY
Common stock, one thousand shares authorized,
issued and outstanding, no par value................... 1.0 1.0
Paid-in capital........................................... 465.9 465.9
Retained earnings......................................... 28.8 141.1
-------- --------
Total............................................. 495.7 608.0
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.................. $1,899.9 $1,916.4
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 18
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
MILLIONS 1996 1995 1994
- -------- ------- ------- -------
<S> <C> <C> <C>
COMMON STOCK................................................ $ 1.0 $ 1.0 $ 1.0
------- ------- -------
PAID-IN CAPITAL
Balance at beginning of year.............................. 465.9 471.8 471.8
Other..................................................... -- (5.9) --
------- ------- -------
Balance at end of year.................................... 465.9 465.9 471.8
------- ------- -------
RETAINED EARNINGS
Balance at beginning of year.............................. 141.1 440.4 621.9
Net income................................................ 87.7 100.7 118.5
Common stock dividends paid............................... (200.0) (400.0) (300.0)
------- ------- -------
Balance at end of year.................................... 28.8 141.1 440.4
------- ------- -------
TOTAL COMMON STOCKHOLDER'S EQUITY........................... $ 495.7 $ 608.0 $ 913.2
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 19
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
MILLIONS 1996 1995 1994
- -------- ------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 87.7 $ 100.7 $ 118.5
Adjustments to reconcile net income to operating cash
flows
Depreciation and amortization.......................... 57.8 59.2 51.7
Deferred income tax expense (benefit).................. (87.9) (3.7) 16.1
Interest income -- parent.............................. -- -- (42.6)
Regulatory resolutions................................. (16.2) (20.7) (27.3)
Other non-cash items in net income..................... 19.3 (1.1) (3.5)
Net change in operating assets and liabilities (detail
below)............................................... 43.4 17.7 49.7
------- ------- -------
Net Cash Flows Provided by Operating Activities........... 104.1 152.1 162.6
------- ------- -------
INVESTING ACTIVITIES
Capital expenditures...................................... (51.6) (64.6) (83.5)
Net decrease (increase) in advances and note
receivable -- parent................................... (84.2) 25.6 271.4
Property retirements and other............................ 29.7 13.4 25.6
------- ------- -------
Net Cash Flows Provided by (Used in) Investing
Activities............................................. (106.1) (25.6) 213.5
------- ------- -------
FINANCING ACTIVITIES
Retirement of debt........................................ -- (125.1) (175.1)
Issuance of debt.......................................... -- -- 99.9
Dividends paid............................................ -- -- (300.0)
Net increase (decrease) in accounts payable -- banks...... 1.9 (1.6) 0.2
Other..................................................... -- -- (1.1)
------- ------- -------
Net Cash Flows Provided by (Used in) Financing
Activities............................................. 1.9 (126.7) (376.1)
------- ------- -------
NET CHANGE IN CASH
Decrease in cash and cash equivalents..................... (0.1) (0.2) --
Cash and cash equivalents, beginning of year.............. 0.2 0.4 0.4
------- ------- -------
Cash and Cash Equivalents, End of Year.................... $ 0.1 $ 0.2 $ 0.4
======= ======= =======
NET CHANGE IN OPERATING ASSETS AND LIABILITIES
Accounts receivable....................................... $ (31.0) $ (11.4) $ 47.6
Inventory and supplies.................................... 11.0 10.4 3.8
Income tax -- parent...................................... 8.2 (13.7) (12.0)
Other current assets...................................... (1.5) 24.1 20.9
Rate refund provisions.................................... 6.7 15.3 47.7
Accounts payable.......................................... (2.5) 2.7 (35.2)
Other current liabilities................................. 23.2 (3.8) (14.8)
Transition cost recoveries (payments), net................ 11.9 (0.1) 9.9
Other deferred charges and liabilities, net............... 17.4 (5.8) (18.2)
------- ------- -------
Total..................................................... $ 43.4 $ 17.7 $ 49.7
======= ======= =======
SUPPLEMENTAL DISCLOSURES
Cash paid for interest (net of amount capitalized)........ $ 62.2 $ 39.7 $ 43.0
Cash paid for income tax (including intercompany
amounts)............................................... 59.8 78.9 103.0
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 20
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX PAGE
- ----- ----
<C> <S> <C>
1. Accounting Policies Summary................................. F-7
2. Transactions with Affiliates................................ F-8
3. Natural Gas Revenues and Regulatory Matters................. F-9
4. Income Tax.................................................. F-10
5. Financial Instruments and Credit Risk....................... F-11
6. Inventory and Gas Imbalances................................ F-11
7. Investments................................................. F-12
8. Plant, Property and Equipment............................... F-12
9. Debt and Credit Facilities.................................. F-12
10. Leases...................................................... F-13
11. Environmental Matters....................................... F-13
12. Litigation.................................................. F-13
13. Pension and Other Benefits.................................. F-14
</TABLE>
1. ACCOUNTING POLICIES SUMMARY
The accounting policies are presented to assist the reader in evaluating
the consolidated financial statements of Panhandle Eastern Pipe Line Company
(PEPL) and its subsidiaries (the Company), including Trunkline Gas Company
(Trunkline). PEPL is a wholly-owned subsidiary of PanEnergy Corp (PanEnergy).
Certain amounts for prior years have been reclassified in the consolidated
financial statements to conform to the current presentation.
The Company is primarily involved in the interstate transportation and
storage of natural gas. The interstate gas transmission and storage operations
of PEPL and Trunkline are subject to the rules and regulations of the Federal
Energy Regulatory Commission (FERC). PEPL and Trunkline meet the criteria and,
accordingly, follow the reporting and accounting requirements of Statement of
Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation." Accordingly, certain net costs totaling $104.9
million have been deferred as regulatory assets for amounts recoverable from
customers, including costs related to environmental matters, Order 636
transition, certain employee benefits and the early retirement of debt. PEPL and
Trunkline regularly evaluate the continued applicability of SFAS No. 71,
considering such factors as regulatory changes and the impact of competition.
Principles of Consolidation. The consolidated financial statements include
the accounts of PEPL and all subsidiaries. Significant intercompany items have
been eliminated in consolidation. Investments in 20% to 50%-owned affiliates and
in less than 20%-owned affiliates where the Company has general partnership
interests and significant influence over operations are accounted for on the
equity method. See Note 7.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts in the financial
statements. Actual results could differ from those estimates.
Revenue Recognition. The Company recognizes transportation and storage
revenues in the period service is provided. When rate cases are pending final
FERC approval, a portion of the revenues collected by each interstate natural
gas pipeline is subject to possible refund. The Company has established adequate
reserves where required for such cases. See Note 3 for a summary of pending rate
cases before FERC and related regulatory matters.
Cash and Cash Equivalents. All liquid investments with maturities at date
of purchase of three months or less are considered cash equivalents.
F-7
<PAGE> 21
Plant, Property and Equipment. Plant, property and equipment is stated at
original cost, which does not purport to represent replacement or realizable
value. Assets are grouped and evaluated for potential impairment based on the
ability to identify separate cash flows generated therefrom.
At the time FERC-regulated properties are retired, the original cost plus
the cost of retirement, less salvage, is charged to accumulated depreciation and
amortization. When entire FERC-regulated operating units are sold or
non-regulated properties are retired or sold, the plant and related accumulated
depreciation and amortization accounts are reduced and any gain or loss is
credited or charged to income, unless otherwise required by FERC. Depreciation
of plant, property and equipment is computed using the straight-line method. See
Note 8.
Early Retirement of Debt. The Company defers certain costs and losses, as
permitted by FERC, related to the early retirement of long-term debt and
amortizes such amounts as they are recovered through rates. At December 31, 1996
and 1995, other deferred charges included $12.5 million and $15.3 million,
respectively, of such costs.
Interest Cost Capitalization. The Company capitalizes interest on major
projects during construction. The rates used by PEPL and Trunkline are
calculated pursuant to FERC rules and include an allowance for equity funds.
Deferred Income Tax. The Company follows the asset and liability method of
accounting for income tax. Under this method, the effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income in the
period the rate change is enacted. See Note 4.
2. TRANSACTIONS WITH AFFILIATES
A summary of transactions with affiliates included in the consolidated
statement of income follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------
MILLIONS 1996 1995 1994
- -------- ------- ------- -------
<S> <C> <C> <C>
Transportation of natural gas............................... $ 30.2 $ 33.4 $ 38.4
Other operating revenues.................................... 8.8 10.7 16.2
Natural gas purchased....................................... -- -- 58.3
Operating expenses
Billed to affiliates...................................... 2.5 2.4 2.2
Billed from affiliates.................................... 3.7 2.6 6.5
General and administrative expenses
Billed to affiliates...................................... 4.8 4.2 3.0
Billed from affiliates.................................... 64.2 45.9 55.7
Interest expense............................................ 34.8 (0.3) --
Interest income............................................. -- -- 42.6
</TABLE>
During 1994, net intercompany advances bore interest at variable rates
based on LIBOR (London Interbank Offered Rates). Effective January 1, 1995,
intercompany advances do not bear interest. Advances are carried as open
accounts and are not segregated between current and non-current amounts.
Increases and decreases in advances result from the movement of funds to provide
for operations, capital expenditures and debt payments of PanEnergy and its
subsidiaries. The collection of advances receivable is subject to the
availability of funds to PanEnergy, whose major sources of internally-generated
funds include dividends and advances from subsidiaries.
See Notes 4, 7 and 13 for discussion of other specific transactions with
affiliates.
F-8
<PAGE> 22
3. NATURAL GAS REVENUES AND REGULATORY MATTERS
FERC Order 636 and Transition Costs
PEPL and Trunkline primarily provide transportation and storage services
pursuant to FERC Order 636. Order 636 allows pipelines to recover eligible costs
resulting from implementation of the order (transition costs). On July 16, 1996,
the U.S. Court of Appeals for the District of Columbia upheld, in general, all
aspects of Order 636 and remanded certain issues, including recovery of gas
supply realignment (GSR) costs, for further explanation. This decision is on
appeal to the U.S. Supreme Court. On February 27, 1997, FERC issued an order
reaffirming the right of interstate pipelines to recover 100% of GSR costs. In
addition, this matter is substantially mitigated by PEPL's transition cost
settlements with customers.
In 1993, the U.S. Department of the Interior (the Department) announced its
intention to seek additional royalties from gas producers as a result of
payments received by such producers in connection with past take-or-pay
settlements, and buyouts and buydowns of gas sales contracts with natural gas
pipelines. PEPL and Trunkline, with respect to certain producer contract
settlements, may be contractually required to reimburse or, in some instances,
to indemnify producers against such royalty claims. The potential liability of
the producers to the government and of the pipelines to the producers involves
complex issues of law and fact which are likely to take substantial time to
resolve. On August 27, 1996, the U.S. Court of Appeals for the District of
Columbia overturned a lower court ruling in favor of the government in
litigation brought on behalf of producers. The Department's petition for
rehearing was denied in November 1996. The Department may continue to seek
further appellate review. If PEPL and Trunkline ultimately have to reimburse or
indemnify the producers, they will file with FERC to recover a portion of these
costs from pipeline customers. The Company believes the resolution of this
matter will not have a material adverse effect on the Company's consolidated
financial position.
Jurisdictional Transportation and Sales Rates
PEPL. On April 1, 1992 and November 1, 1992, PEPL placed into effect,
subject to refund, general rate increases. On September 12, 1996, PEPL filed a
settlement proposal relating to both rate proceedings on behalf of itself and
the majority of its largest customers. On December 20, 1996 and February 26,
1997, FERC approved PEPL's settlement agreement which resolves refund matters
and establishes prospective rates for settling parties. The agreement, which
remains subject to rehearing, terminates other actions relating to these
proceedings as well as PEPL's restructuring of rates and transition cost
recoveries related to Order 636. The settlement requires refunds to customers by
PEPL of approximately $38 million for the period from April 1, 1992 through
March 31, 1997, including principal and interest, and will not have a material
impact on future operating revenues.
As a result of the resolution of matters in certain proceedings, PEPL
recorded pre-tax earnings of $8 million, $20.6 million and $25 million in 1996,
1995 and 1994, respectively.
Trunkline. Effective August 1, 1996, Trunkline placed into effect a general
rate increase, subject to refund. The rate proceeding is in the discovery phase
with hearings scheduled to commence in the third quarter of 1997.
Other. At December 31, 1996 and 1995, regulatory assets of $9.9 million and
$0.3 million (1996), and $9.5 million and $4.3 million (1995), were included in
other current assets and deferred charges, respectively, related to gas purchase
and transportation contract settlements in prior years.
F-9
<PAGE> 23
4. INCOME TAX
The Company's taxable income is included in a consolidated federal income
tax return with PanEnergy. Therefore, income tax has been provided in accordance
with PanEnergy's tax allocation policy, which requires regulated subsidiaries to
calculate federal income tax as if separate taxable income, as defined, was
reported.
Income tax as presented in the consolidated statement of income is
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------
MILLIONS 1996 1995 1994
- -------- ------ ----- -----
<S> <C> <C> <C>
Current
Federal................................................. $123.1 $54.0 $50.8
State................................................... 13.1 8.8 8.9
------ ----- -----
Total current................................... 136.2 62.8 59.7
------ ----- -----
Deferred
Federal................................................. (75.6) 2.3 11.1
State................................................... (12.3) (6.0) 5.0
------ ----- -----
Total deferred.................................. (87.9) (3.7) 16.1
------ ----- -----
Total income tax.......................................... $ 48.3 $59.1 $75.8
====== ===== =====
</TABLE>
Total income tax differs from the amount computed by applying the federal
income tax rate to income before income tax. The reasons for this difference are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
MILLIONS 1996 1995 1994
- -------- ----- ----- -----
<S> <C> <C> <C>
Federal income tax rate.................................... 35% 35% 35%
===== ===== =====
Income tax, computed at the statutory rate................. $47.6 $55.9 $68.0
Adjustments resulting from
State income tax, net of federal income tax effect....... 0.5 1.8 9.1
Other items, net......................................... 0.2 1.4 (1.3)
----- ----- -----
Total income tax................................. $48.3 $59.1 $75.8
===== ===== =====
Effective tax rate......................................... 35.5% 37.0% 39.0%
===== ===== =====
</TABLE>
The tax effects of temporary differences that resulted in deferred income
tax assets and liabilities, and a description of the significant financial
statement items that created these differences, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
MILLIONS 1996 1995
- -------- ------- -------
<S> <C> <C>
Deferred liabilities and credits............................ $ 114.2 $ 69.9
Rate refund provisions...................................... 13.3 16.2
Other....................................................... 8.8 9.0
------- -------
Total deferred income tax assets.................. 136.3 95.1
------- -------
Plant, property and equipment............................... (129.8) (149.1)
Deferred charges............................................ (46.8) (63.2)
Investments................................................. (16.0) (16.7)
State deferred income tax, net of federal tax effect........ (5.1) (13.4)
Other current assets........................................ (7.3) (7.0)
Other....................................................... (6.2) (9.2)
------- -------
Total deferred income tax liabilities............. (211.2) (258.6)
------- -------
Net deferred income tax liability, net of current amounts... $ (74.9) $(163.5)
======= =======
</TABLE>
F-10
<PAGE> 24
5. FINANCIAL INSTRUMENTS AND CREDIT RISK
Financial Instruments
<TABLE>
<CAPTION>
APPROXIMATE
MILLIONS BOOK VALUE FAIR VALUE
- -------- ---------- -----------
ASSETS (LIABILITIES)
<S> <C> <C> <C>
DECEMBER 31, 1996
Cash............................................. $ 0.1 $ 0.1
Other current receivables........................ 4.5 4.5
Notes payable -- parent.......................... Note 9 (600.0) (600.0)*
Long-term debt................................... Note 9 (299.2) (302.6)*
DECEMBER 31, 1995
Cash............................................. $ 0.2 $ 0.2
Other current receivables........................ 3.4 3.4
Note payable -- parent........................... Note 9 (400.0) (400.0)*
Long-term debt................................... Note 9 (303.7) (318.0)*
</TABLE>
- ---------------
* Based on quoted market prices for the same or similar issues, discounted
cash flows and/or rates currently available to the Company for debt with
similar terms and remaining maturities.
PanEnergy's four interstate natural gas pipelines have implemented an
agreement to sell with limited recourse, on a continuing basis, current accounts
receivable at a discount. At December 31, the Company had a $34 million
liability recorded for collections by the Company of accounts receivable sold in
December 1996. In 1993, the Company sold liquefied natural gas (LNG) project
settlement receivables, with limited recourse. At December 31, 1996, $29.9
million remained outstanding on the LNG settlement receivables sold. In the
opinion of management, the probability that the Company will be required to
perform under either of the above recourse provisions is remote.
The following financial instruments have no book value associated with them
and there are no fair values readily determinable since quoted market prices are
not available: recourse provisions of the LNG project settlement and trade
accounts receivable sales agreements, and the Northern Border Pipeline Company
(Northern Border Pipeline) transportation agreement guarantee (Note 7). The fair
values of advances and note receivable-parent are not readily determinable since
such amounts are carried as open accounts. See Note 2.
Significant Customers and Concentrations. Customer billings that exceeded
10% of consolidated revenues during the years ended December 31, 1996, 1995 or
1994 were those to Consumers Power Company totaling $48.5 million, $54.5 million
and $251.7 million, respectively.
The Company's primary market area is located in the Midwest region of the
United States. The Company has a concentration of receivables due from gas and
electric utilities in this area, which may affect the Company's overall credit
risk in that certain customers may be similarly affected by changes in economic,
regulatory or other factors. Trade receivables are generally not collateralized;
however, the Company analyzes customers' credit positions, establishes credit
limits and monitors the appropriateness of those limits on an ongoing basis.
6. INVENTORY AND GAS IMBALANCES
Inventory and supplies, which include gas held for operations, are recorded
using the average cost and last-in first-out methods ($31.1 million and $13.2
million, respectively, at December 31, 1996, and $33.1 million and $22.2
million, respectively, at December 31, 1995) and do not exceed recoverable cost.
The consolidated balance sheet includes in-kind balances as a result of
differences in gas volumes received and delivered. At December 31, 1996 and
1995, other current assets and other current liabilities included $20.4 million
and $14.1 million (1996), and $11.1 million and $11.2 million (1995),
respectively, for these imbalances.
F-11
<PAGE> 25
7. INVESTMENTS
Northern Border Partners, L.P. Northern Border Partners, L.P. is a master
limited partnership (MLP) that owns 70% of Northern Border Pipeline, a
partnership operating a pipeline transporting natural gas from Canada to the
Midwest area of the United States. The Company has general partner interests as
well as subordinated limited partnership interests, totaling 8%, in Northern
Border Partners, L.P., and through the MLP, an effective 6% ownership interest
in Northern Border Pipeline.
Under the terms of a settlement related to a transportation agreement
between PEPL and Northern Border Pipeline, PEPL guarantees payment to Northern
Border Pipeline under a transportation agreement by an affiliate of Pan-Alberta
Gas Limited. The transportation agreement requires estimated total payments of
$94.4 million for 1997 through 2001. In the opinion of management, the
probability that PEPL will be required to perform under this guarantee is
remote.
Westana Gathering Company. Westana Gathering Company is a joint venture
that provides gathering, processing and marketing services for natural gas
producers in Oklahoma.
Undistributed earnings of investments in affiliates were $15.5 million and
$16.8 million at December 31, 1996 and 1995, respectively. Distributions and
dividends received by the Company amounted to $6.9 million in 1996 and $5
million in both 1995 and 1994.
8. PLANT, PROPERTY AND EQUIPMENT
A summary of plant, property and equipment by classification follows:
<TABLE>
<CAPTION>
DECEMBER 31
DEPRECIATION --------------------
MILLIONS RATES 1996 1995
- -------- ------------ -------- --------
<S> <C> <C> <C>
Transmission....................................... 2% $1,933.0 $1,972.0
Gathering.......................................... 1% - 7% 215.6 294.9
Underground storage................................ 3% - 4% 319.5 319.2
General plant...................................... 4% - 13% 180.4 171.7
Construction work in progress...................... -- 23.7 24.3
-------- --------
Total plant, property and equipment...... $2,672.2 $2,782.1
======== ========
</TABLE>
9. DEBT AND CREDIT FACILITIES
A summary of long-term debt follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
MILLIONS 1996 1995
- -------- ------ ------
<S> <C> <C>
Notes
4% maturing 1996.......................................... $ -- $ 4.5
7 7/8% maturing 2004...................................... 100.0 100.0
Debentures
7.95% maturing 2023....................................... 100.0 100.0
7.2% maturing 2024........................................ 100.0 100.0
Unamortized Discount........................................ (0.8) (0.8)
Less Current Maturities..................................... -- (4.5)
------ ------
Total Long-term Debt.............................. $299.2 $299.2
====== ======
</TABLE>
The interest rates indicated were in effect on principal balances
outstanding at December 31, 1996. Interest costs capitalized in 1996, 1995 and
1994 were $0.3 million each year.
In December 1996, PEPL declared and paid a dividend on common stock of $100
million in the form of a promissory note due PanEnergy bearing interest at prime
rate and maturing on June 30, 1997. In July 1996 and December 1995, PEPL
declared and paid dividends on common stock of $100 million and $400 million,
F-12
<PAGE> 26
respectively, in the form of promissory notes due PanEnergy maturing on December
31, 1996 and June 30, 1996, respectively. In 1996, these notes were cancelled
and a new note was issued for $500 million bearing interest at prime rate and
maturing on June 30, 1997.
PEPL has an effective shelf registration statement with the Securities and
Exchange Commission for the issuance of $100 million of unsecured debt
securities.
10. LEASES
The Company utilizes assets under operating leases in several areas of
operations. Consolidated rental expense for these leases and for lease expenses
allocated from affiliates amounted to $29.6 million, $16.8 million and $13.2
million in 1996, 1995 and 1994, respectively. Minimum rental payments under the
Company's various operating leases for the years 1997 through 2001 are $23
million, $9.5 million, $8.7 million, $7.3 million and $4.6 million,
respectively. Thereafter, payments aggregate $1.7 million.
11. ENVIRONMENTAL MATTERS
The Company has identified environmental contamination at certain sites on
the PEPL and Trunkline systems and is undertaking cleanup programs at these
sites. The contamination resulted from the past use of lubricants containing
PCBs (polychlorinated biphenyls) and the prior use of wastewater collection
facilities and other on-site disposal areas. Soil and sediment testing, to date,
has detected no significant off-site contamination. The Company has communicated
with the Environmental Protection Agency and appropriate state regulatory
agencies on these matters. Environmental cleanup programs are expected to
continue until 2002.
The Company previously accrued amounts related to remaining estimated
cleanup costs. Those amounts represent an estimate of probable gross cleanup
costs to be incurred by the Company, have not been discounted or reduced by
customer recoveries and do not include fines, penalties or third-party claims.
The federal and state cleanup programs are not expected to interrupt or
diminish the Company's ability to deliver natural gas to customers. The Company
believes the resolution of matters relating to the environmental issues
discussed above will not have a material adverse effect on consolidated results
of operations or financial position due to customer settlements and past
experience with environmental cleanup costs.
12. LITIGATION
On August 31, 1995, Midwest Gas Storage, Inc. (Midwest) filed suit against
PEPL and PanEnergy in the 58th Judicial District Court, Jefferson County, Texas,
alleging that PEPL breached an interconnection agreement with Midwest and used
its superior bargaining position to force Midwest to accept terms and conditions
which were not in the original agreement. Amended petitions filed in 1996
further allege that PEPL and PanEnergy, through economic coercion, have
attempted to drive Midwest out of business. Asserting fraud and violations of
Texas anti-trust laws, among other counts, Midwest seeks compensatory and
punitive damages in unspecified amounts. On February 21, 1997, the defendants
removed the case to the U.S. District Court for the Eastern District of Texas,
Beaumont Division. The Company believes the resolution of this matter will not
have a material adverse effect on the Company's consolidated results of
operations or financial position.
A lawsuit filed in the United States District Court for the District of
Columbia by natural gas producer Jack Grynberg was served in July 1996 naming
PEPL, Trunkline and certain affiliated companies as defendants, among others.
The action was brought under the federal False Claims Act against 70 defendants,
including every major pipeline, asserting that the defendants intentionally
underreported volumes and heating content of gas purchased from producers on
federal and Indian lands, with the result that the United States was underpaid
royalties. The plaintiff seeks recovery of royalty amounts due the United
States, treble damages and civil penalties. Because this matter is in the early
stages of litigation, the Company cannot estimate the effect of this issue based
on information currently available.
F-13
<PAGE> 27
The Company is also involved in various other legal actions and claims
arising in the normal course of business. Based upon its current assessment of
the facts and the law, management does not believe that the outcome of any such
action or claim will have a material adverse effect upon the consolidated
results of operations or financial position of the Company. However, these
actions and claims in the aggregate seek substantial damages against the Company
and are subject to the uncertainties inherent in any litigation. The Company is
defending itself vigorously in all the above suits.
13. PENSION AND OTHER BENEFITS
Pension Benefits. PanEnergy has, and the Company participates in, a
non-contributory trusteed pension plan covering eligible employees with a
minimum of one year vesting service. The plan provides pension benefits for
eligible employees of the Company that are generally based on an employee's
years of benefit accrual service and highest average eligible earnings.
PanEnergy's policy is to fund amounts, as necessary, on an actuarial basis to
provide assets sufficient to meet the benefits to be paid to plan members.
The components of the Company's net pension benefit, allocated by
PanEnergy, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------
MILLIONS 1996 1995 1994
- -------- ------ ------ ------
<S> <C> <C> <C>
Actual return on plan assets............................. $ 42.2 $ 56.3 $ (0.7)
Amount deferred.......................................... (17.5) (32.8) 23.6
------ ------ ------
Expected return on plan assets........................... 24.7 23.5 22.9
Service cost benefits earned during the period........... (4.6) (4.0) (4.6)
Interest cost on projected benefit obligations........... (11.5) (11.6) (11.1)
Net amortization......................................... 2.4 2.7 2.7
------ ------ ------
Net pension benefit............................ $ 11.0 $ 10.6 $ 9.9
====== ====== ======
</TABLE>
Assumptions used in the Company's pension and other postretirement benefits
accounting are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
PERCENT 1996 1995 1994
- ------- ---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 7.5 7.5 8.5
Rate of increase in compensation levels..................... 5.0 5.0 5.0
Expected long-term rate of return on plan assets............ 9.5 9.5 9.5
Assumed tax rate, where applicable.......................... 39.6 39.6 39.6
</TABLE>
PanEnergy also sponsors, and the Company participates in, an employee
savings plan which covers substantially all employees. The Company expensed plan
contributions of $3.4 million, $3.8 million and $4.3 million in 1996, 1995 and
1994, respectively.
Other Postretirement Benefits. The Company's postretirement benefits, in
conjunction with PanEnergy, consist of certain health care and life insurance
benefits. Substantially all of the Company's employees may become eligible for
these benefits when they reach retirement age while working for the Company and
have attained 10 years of specified service. The benefits are provided through
contributory and noncontributory trusteed benefit plans.
The Company accrues such benefit costs over the active service period of
employees to the date of full eligibility for the benefits. The net unrecognized
transition obligation, resulting from the implementation of accrual accounting
in 1993, is being amortized over approximately 20 years.
It is the Company's and PanEnergy's general policy to fund accrued
postretirement health care costs. PanEnergy's retiree life insurance plan is
fully funded based on actuarially-determined requirements. FERC policy generally
allows, subject to individual pipeline proceedings, for current rate recovery of
funded accrued postretirement benefit costs including amortization of the
transition obligation. PEPL's and Trunkline's postretirement costs are included
in current tariff rates.
F-14
<PAGE> 28
The components of the Company's net postretirement benefits cost, allocated
by PanEnergy, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
MILLIONS 1996 1995 1994
- -------- ----- ----- -----
<S> <C> <C> <C>
Actual return on plan assets................................ $ 6.3 $13.6 $ --
Amount deferred............................................. (0.5) (8.2) 5.3
----- ----- -----
Expected return on plan assets.............................. 5.8 5.4 5.3
Service cost benefits earned during the period.............. (0.8) (0.7) (0.9)
Interest cost on accumulated obligations.................... (8.5) (8.8) (8.5)
Net amortization and deferral............................... (3.6) (2.2) (2.3)
----- ----- -----
Net postretirement benefits cost.................. $(7.1) $(6.3) $(6.4)
===== ===== =====
</TABLE>
The assumed health care cost trend rate used to estimate postretirement
benefits was 7% for 1997. The health care cost trend rate is expected to
decrease, with a 5.5% ultimate trend rate expected to be achieved by 1999. The
effect of a 1% increase in the assumed health care cost trend rate for each
future year is $0.4 million on the annual aggregate postretirement benefit cost
and $5.5 million on PanEnergy's accumulated postretirement benefit obligation
attributable to the Company at December 31, 1996.
Other Postemployment Benefits. The Company accrues such benefit costs
provided by the Company to certain former or inactive employees. PEPL has
received permission from FERC to defer such costs, pending future rate filings
requesting recovery. Trunkline is recovering such costs in current tariff rates
over a ten-year period.
F-15
<PAGE> 29
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS ENDED
-------------------------------------------
MILLIONS MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C>
1996
Operating revenues.................................. $151.4 $118.4 $123.2 $140.6
Operating expenses.................................. 98.0 73.9 88.3 85.3
------ ------ ------ ------
Operating income.................................... 53.4 44.5 34.9 55.3
Other income, net of deductions..................... 0.9 3.3 12.2 (6.7)
------ ------ ------ ------
Earnings before interest and tax.................... 54.3 47.8 47.1 48.6
Interest expense.................................... 15.0 14.4 15.5 16.9
------ ------ ------ ------
Earnings before income tax.......................... 39.3 33.4 31.6 31.7
Income tax.......................................... 15.3 12.9 12.3 7.8
------ ------ ------ ------
Net income.......................................... $ 24.0 $ 20.5 $ 19.3 $ 23.9
====== ====== ====== ======
1995
Operating revenues.................................. $142.4 $124.9 $140.4 $132.3
Operating expenses.................................. 91.1 87.8 88.0 83.2
------ ------ ------ ------
Operating income.................................... 51.3 37.1 52.4 49.1
Other income, net of deductions..................... 0.5 (0.5) 2.4 5.1
------ ------ ------ ------
Earnings before interest and tax.................... 51.8 36.6 54.8 54.2
Interest expense.................................... 10.4 9.8 10.0 7.4
------ ------ ------ ------
Earnings before income tax.......................... 41.4 26.8 44.8 46.8
Income tax.......................................... 16.3 10.5 17.7 14.6
------ ------ ------ ------
Net income.......................................... $ 25.1 $ 16.3 $ 27.1 $ 32.2
====== ====== ====== ======
</TABLE>
Certain amounts for the prior year have been reclassified to conform to the
current reporting presentation.
F-16
<PAGE> 30
PANHANDLE EASTERN PIPE LINE COMPANY AND SUBSIDIARIES
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------------------------
MILLIONS 1996 1995 1994 1993 1992
- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES................ $ 533.6 $ 540.0 $ 739.9 $ 870.5 $ 972.0(1)
COSTS AND EXPENSES
Natural gas purchased........... -- -- 177.9 281.3 359.0
Operating and maintenance....... 177.2 190.9 198.4 232.6 244.7
Depreciation and amortization... 57.8 59.2 51.7 55.6 72.8
Other costs and expenses........ 110.5 100.0 114.2 123.2 138.5
--------- --------- --------- --------- ---------
OPERATING INCOME.................. $ 188.1 $ 189.9 $ 197.7 $ 177.8 $ 157.0
EARNINGS BEFORE INTEREST AND
TAX............................... $ 197.8 $ 197.4 $ 199.2 $ 234.2 $ 153.1
INTEREST EXPENSE.................. $ 61.8 $ 37.6 $ 47.5 $ 55.7 $ 57.4
NET INCOME........................ $ 87.7 $ 100.7 $ 118.5 $ 120.1(2) $ 62.5(1)
PLANT, PROPERTY AND EQUIPMENT..... $ 2,672.2 $ 2,782.1 $ 2,742.8 $ 2,685.2 $ 2,873.0
Accumulated depreciation and
amortization.................... (1,749.6) (1,818.8) (1,763.2) (1,709.4) (1,799.6)
--------- --------- --------- --------- ---------
Net plant, property and
equipment....................... $ 922.6 $ 963.3 $ 979.6 $ 975.8 $ 1,073.4
TOTAL ASSETS...................... $ 1,899.9 $ 1,916.4 $ 1,983.6 $ 2,265.1 $ 2,501.2
CAPITAL STRUCTURE
Long-term debt, including
current maturities........... $ 299.2 $ 303.7 $ 428.5 $ 503.3 $ 573.9
Notes payable................... 600.0 400.0 -- -- 50.0
Common stockholder's equity..... 495.7 608.0 913.2 1,094.7 974.9
--------- --------- --------- --------- ---------
TOTAL CAPITALIZATION.............. $ 1,394.9 $ 1,311.7 $ 1,341.7 $ 1,598.0 $ 1,598.8
OPERATING CASH FLOW............... $ 104.1 $ 152.1 $ 162.6 $ 234.4 $ 106.5
CAPITAL EXPENDITURES.............. $ 51.6 $ 64.6 $ 83.5 $ 93.5 $ 63.3
NATURAL GAS TRANSMISSION VOLUMES,
TBtu(3)
Transports...................... 1,319 1,182 1,186 1,084 1,045
Sales(4)........................ -- -- -- 90 159
--------- --------- --------- --------- ---------
Total........................... 1,319 1,182 1,186 1,174 1,204
========= ========= ========= ========= =========
</TABLE>
Certain amounts for the prior years have been reclassified to conform to the
current reporting presentation.
(1) Includes $19.9 million in operating revenues and $15.9 million in net income
related to a settlement with PanEnergy Corp's liquefied natural gas project.
(2) Includes a gain of $48.2 million ($28.7 million after tax) resulting from
the sale of a partial interest in Northern Border Partners, L.P.
(3) Trillion British thermal units.
(4) Excludes 92 TBtu and 42 TBtu for 1994 and 1993, respectively, which are
reported as transports.
See the Notes to Consolidated Financial Statements for a discussion of material
contingencies
F-17
<PAGE> 31
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
PANHANDLE EASTERN PIPE LINE COMPANY
By /s/ ROBERT W. REED
--------------------------------------
(Robert W. Reed, Secretary)
Dated: March 26, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 26, 1997.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE
------------------ -----
<C> <C> <S>
(i) Principal executive officer:*
/s/ STEVEN M. ROVERUD President
------------------------------------------------
(Steven M. Roverud)
(ii) Principal financial officer:*
/s/ PAUL F. FERGUSON, JR. Senior Vice President and
------------------------------------------------ Chief Financial Officer
(Paul F. Ferguson, Jr.)
(iii) Principal accounting officer:*
/s/ SANDRA P. MEYER Vice President and Treasurer
------------------------------------------------
(Sandra P. Meyer)
(iv) Directors:*
PAUL M. ANDERSON
DENNIS R. HENDRIX
STEVEN M. ROVERUD
* Signed on behalf of each of these persons:
By /s/ ROBERT W. REED
----------------------------------------------------
(Robert W. Reed, Attorney-in-Fact)
</TABLE>
F-18
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- --------
<S> <C> <C> <C>
3.01 Restated Certificate of 3.01 to Form 10-K of PEPL for the 1-2921
Incorporation of Panhandle Eastern year ended December 31, 1993
Pipe Line Company, dated October
25, 1993
3.02 By-Laws of Panhandle Eastern Pipe 19(a) to Form 10-Q of PEPL for 1-2921
Line Company, effective July 23, quarter ended September 30, 1986
1986
4.01 Indenture, dated as of February 1, 4 to Form S-3 of PEPL filed 33-58552
1993, between Panhandle Eastern February 19, 1993
Pipe Line Company and Morgan
Guaranty Trust Company of New York
4.02 Letter, dated February 24, 1994, 4.06 to Form 10-K of PEPL for the 1-2921
from Nations Bank of Texas, year ended December 31, 1993
National Association accepting its
appointment as successor Trustee
with respect to all securities
issued or to be issued under the
Indenture dated as of February 1,
1993, included as Exhibit 4.05
10.01 Contract for Firm Transportation 10.41 to Form 10-K of PEC for the 1-8157
of Natural Gas between Consumers year ended December 31, 1989
Power Company and Trunkline Gas
Company, dated November 1, 1989,
and Amendment, dated November 1,
1989
10.02 Contract for Firm Transportation 10.47 to Form 10-K of PEC for year 1-8157
of Natural Gas between Consumers ended December 31, 1991
Power Company and Trunkline Gas
Company, dated November 1, 1991
10.03 Contract for Firm Transportation 10.3 to Form 10-K of PEPL for the 1-2921
of Natural Gas between Consumers year ended December 31, 1993
Power Company and Trunkline Gas
Company, dated September 1, 1993
*23 Consent of KPMG Peat Marwick LLP
*24 Powers of Attorney
*27 Financial Data Schedule for
December 31, 1996
</TABLE>
<PAGE> 1
Exhibit 23
ACCOUNTANTS' CONSENT
The Board of Directors
Panhandle Eastern Pipe Line Company:
We consent to incorporation by reference in the registration statement
(No. 33-72958) on Form S-3 of Panhandle Eastern Pipe line Company of our report
dated January 23, 1996, relating to the consolidated balance sheets of Panhandle
Eastern Pipe Line Company and Subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, common stockholder's equity,
and cash flows for each of the years in the three-year period ended December
31, 1995, which report appears in the December 31, 1995 annual report on
Form 10-K of Panhandle Eastern Pipe Line Company.
KPMG PEAT MARWICK LLP
Houston, Texas
March 28, 1996
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officers and/or
Directors of PANHANDLE EASTERN PIPE LINE COMPANY (the "Company"), a Delaware
corporation, do hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING AND ROBERT W. REED, and each of them, their true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign their names as Officers
and/or Directors of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned do hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents this
26th day of March, 1997
/s/ DENNIS HENDRIX /s/ PAUL M. ANDERSON
- ----------------------------- -----------------------------
Dennis Hendrix Paul M. Anderson
/s/ STEVEN M. ROVERUD
- -----------------------------
Steven M. Roverud
/s/ PAUL F. FERGUSON, JR. /s/ SANDRA P. MEYER
- ----------------------------- -----------------------------
Paul F. Ferguson, Jr. Sandra P. Meyer
Senior Vice President and Vice President, Treasurer and
Chief Financial Officer Assistant Secretary
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Panhandle Eastern Pipe Line Company Annual Report on Form 10-K for the year
ended December 31, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000076063
<NAME> PANHANDLE EASTERN PIPE LINE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 58,100
<ALLOWANCES> 0
<INVENTORY> 44,300
<CURRENT-ASSETS> 168,500
<PP&E> 2,672,200
<DEPRECIATION> 1,749,600
<TOTAL-ASSETS> 1,899,900
<CURRENT-LIABILITIES> 841,700
<BONDS> 299,200
1,000
0
<COMMON> 0
<OTHER-SE> 494,700
<TOTAL-LIABILITY-AND-EQUITY> 1,899,900
<SALES> 0
<TOTAL-REVENUES> 533,600
<CGS> 0
<TOTAL-COSTS> 177,200
<OTHER-EXPENSES> 84,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,800
<INCOME-PRETAX> 136,000
<INCOME-TAX> 48,300
<INCOME-CONTINUING> 87,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,700
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not meaningful since Panhandle Eastern Pipe Line Company is a wholly-owned
subsidiary.
</FN>
</TABLE>
